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Monday, June 23, 2014

Feds Bail Out For-Profit College Chain

Yup. According to a Monday, June 23 press release from the USDOE, the DOE has signed an agreement with Corinthian Colleges, Inc, to keep the large for-profit college chain open long enough to finish the year, or so.

Corinthian has a somewhat checkered past. Okay, checkered might be generous. They have grown prodigiously since being founded in 1995, acquiring around twenty other post-secondary institutions from Duff's Business School to the American Motorcycle Institute. They operate the Everest College chain, plus a few others. They've been called "the nation's worst private college chain" and have been sued more times than anybody seems to be able to count. The State of California in particular seems to be intent on driving them out of business, charging them with the usual predatory practices of marketing to poverty-level folks with promises of careers that never appear. This would also be the chain who got caught (by Huffington Post, of all people) hiring their own grads to keep their grad-employment numbers up.

Not that this has scared away investors. Wells Fargo, BlackRock, Royce, New York Mellon, and Morgan-Chase have all bought a piece of this action.

Today, this announcement:

The U.S. Department of Education is working with Corinthian Colleges
Inc. on a plan to avoid an immediate closure of the career training
program chain and prevent suddenly disrupting the education of 72,000
students and the jobs of 12,000 employees.

So if nothing else, we now know what "too big to fail" looks like in the for-profit college world.

What's the deal? Corinthian will work at selling and teach-out its programs; a DOE picked monitor will oversee the sales and operation. Corinthian is allowed to enroll new students, but must give refunds to anyone who doesn't qualify for federal aid. In return, the feds will release $16 million in student aid for the students currently enrolled (Corinthian is required to document student enrollment, which seems cool, because these guys don't have a history of acting like crooks or anything.)

“Students and their interests have been at the heart of every decision
the Department has made regarding Corinthian,” said U.S. Under Secretary
of Education Ted Mitchell. “We will continue to closely monitor the
teach-out or sale of Corinthian’s campuses to ensure that students are
able to finish their education without interruption and that employees
experience minimal disruption to their lives. The Department is
committed to ensuring all students receive a quality education that
leads to a well-paying job and a strong future.”

Yes, that Ted Mitchell. The Pearson and privatization guy who know works at the Department of Education.

The Department will put Corinthian under "heightened financial monitoring," and another part of the deal is that Corinthian must stop stonewalling the department regarding records related to the employment lying that HuffPost reported on back in January.

So, on the one hand, 72,000 students who were getting ripped off by these shysters get to receive the rest of... well, whatever it is they were getting. On the other hand, the administration is kind of doing exactly the opposite of what they pledged a few months ago when they said they would shut down programs that were found to be doing, well, pretty much everything that Corinthian has been caught and accused of doing.

Maybe it's a learning curve. Nobody really knows how to use federal powers to shut down a for-profit college, and as we've now noticed, there's an awful lot of collateral damage when a school crashes. Bringing them to ground may turn out to be a long, slow process. But really-- is the best thing to do to let these students, who are likely spending money for sitters, for transportation, for lost work hours, for the sheer challenge of going to classes while living life near the poverty line-- is the best thing for these folks to prolong the bilkery?

At least they're not announcing a plan to keep Corinthian in business forever. But do we say to victims of snake oil salesmen, "Look, this stuff is just a waste of money, but go ahead and keep taking it until we can work something out."

I want to believe that the best interests of the students are being cared for here, but I can't help noticing that the press release doesn't mention Corinthian's general misbehavior or the financuial shenanigans that got it into this mess, or the umpteen court cases brought against it over the last decade, or any reaffirmation of the administration's commitment to protecting Americans from Fraud Colleges.

So maybe we're helping out the 72,000 students. Or maybe we're more concerned about bailing other folks out. I guess time will tell. But this is definitely a story to watch.

2 comments:

Ahhh, our quaint 'concern' about students.... sigh. What BS. It looks more like a backdoor bailout of private investors. The more you read about Corinthian the more slimy it is. The fact that DoEd has bailed them out (while starving public ed) goes to show what a flop the US is turning into. Fraud pays if you happen to be a friend of Arne.

it just happens that Corinthian is one of the for-profits colleges that The Parthenon Group is selling to potential investors as one of their profitable investment examples. Who is the Parthenon Group, you ask? Parthenon is a young ( look at the ages of their employees- a bunch of green MBA's) business consulting company that targets businesspeople who want to start up new for-profit school systems. They are poised to kick the public education dinosaur to the curb and take over education (recall the horseshit fairytale about creative destruction). The Parthenon Group and their MBA's are crawling all over TN selling their privatization plan to Memphis, Nashville, Knoxville, and anyone who is willing to pay them for their product. One of their shitty products they've pitched is online education & Corthinthian is their success story. Here's the PowerPoint BATs in Knoxville found on Parthenon website selling their for-profit education schemes:http://www.parthenon.com/GetFile.aspx?u=%2FLists%2FThoughtLeadership%2FAttachments%2F4%2FParthenon%2520Perspectives_Investing%2520in%2520Education.pdf

Notice from the Parthenon's PP made way back in 2009, Corinthian does not look like it has a path to profitability. Frankly, Corinthian is a load of crap. The Federal Dept of Ed is protecting a criminal enterprise. The overpaid CEO & top administrators are the only beneficiaries. Is this really what we think of education? What does it say about our political leaders & business types that this scam stays in business? If anyone in the federal govt had a moral compass they'd shut down every one of these shyster-schools.

Check out slides 9 & 10 on Parthenon's powerpoint about the impact of regulatory changes & federal stimulus $. Parthenon is "staying on top" of the Dept of Ed's regs & funding changes: "Weekly or monthly, there is a regulatory or funding ‘event’ in education." Is Arne foaming the runway for the banks and financial industry?